The factors that have pushed inflation upward will likely linger into 2022, especially if the Omicron variant comes into play. In his recent remarks to Congress, Federal Reserve Chairman Jerome Powell noted that despite its prior predictions of limited inflation, the Federal Reserve no longer viewed the recent inflation growth as “transitory.” Instead, the Fed is now considering raising interest rates to mitigate the increasing growth of inflation as the prospects of its long-term effects continue to expand.
In response to this crisis, various states are seeking political action, trying to mitigate the negative effects of this inflation. While some try to open up the free market, trying to provide some organic solution to the problem through tax cuts, others policymakers try to provide an artificial solution through monetary policy. While the former actively seeks to resolve the issue, the latter denies the true problem at hand.
In November, Mississippi Senator Roger Wicker expressed the nature of the current economy and the problems with President Biden’s efforts to fix it. The reality is that the inflation problem is far worse than experts had predicted. Prices of goods have risen by 6.2 percent, the greatest margin since 1990. Gas prices are being driven through the roof (nearly 50 percent), placing a great burden on Mississippi agriculture, a critical element of the state’s economy. As a whole, Mississippi has suffered from the effects of inflation, and the reality is that this simply could not be reflected in the predictions of experts.
Senator Wicker’s remarks demonstrate the very reason why monetary policy often does not work. Artificial solutions to economic problems often assume that economic phenomena can be accurately predicted and centrally planned. Various government policies like setting tax rates, printing currency, economic regulations, and government spending merely serve as a manipulative tool to change how the economy works, but they are useless if people cannot predict and prescribe what the economy needs in the near future.
Unfortunately, the inflation crisis rose at a rapid pace, making it nearly impossible to predict. Perhaps the better option is to simply let the free market take its course than sweat over what is the best way to approach monetary policy.
Is concerning is that such policies of government involvement, are often lazy in nature, putting more of an emphasis on the government simply “buying out” the economy rather than establishing good monetary policy. The Heritage Foundation examined the nature of the economy within the Covid-19 context. It explained that while appearing to be helpful and compassionate in a crisis, government spending only postpones the inevitable. It appears that the nation is now reaping what it has sown in its zealous attempt to “protect” the United States economy.
Mississippi faces a hard road ahead, and as much as it is tempting to step in and solve for a wavering economy, it is all the more critical to let free market solutions simply take their course. As useful as studies and expert predictions can be, the whole economy cannot rely on them entirely. After all, no one can predict the future – not even the “experts.”